Investors push reforms in local power sector

MANILA, Philippines—Local and foreign investors have sought the implementation of the necessary schemes and mechanisms as well as the formulation of a clear and more integrated energy plan that will allow the Philippines to have fair and more competitive electricity rates.

According to the recommendations listed in Arangkada Philippines, a publication sponsored by the Joint Foreign Chambers, the government must continue to implement the provisions under the Electric Power Industry Reform Act (Epira), particularly the sale of all government-owned power assets to the private sector.

The advocacy paper, which put together inputs, evaluations and recommendations of nearly 300 local and foreign investors over a six-month period, singled out the much-delayed privatization of the Agus-Pulangi hydropower complex in Mindanao, which it said should already be carried out by the state-run Power Sector Assets and Liabilities Management Corp.

“The Department of Energy still is delaying the implementation of the Epira in Mindanao due to intense pressure from local politicians. Hence, the rehabilitation and expansion of these hydro projects are being delayed,” the paper stated.

“DoE should be charging market prices to reflect the real cost of replacing these hydro facilities and privatize them in five years’ time to the highest bidder,” it added.

However, the decision on whether or not the hydropower complex would be privatized has yet to be issued by the Joint Congressional Power Commission.

Meanwhile, investors also called for the implementation of the open access and retail competition scheme, which President Aquino himself earlier said could likely begin by August this year.

Under the open-access regime, large power users will be able to choose their own electricity suppliers, unlike the current system where they are limited to the supplier that has jurisdiction over their respective areas. This scheme is expected to further spur competition among power stakeholders, resulting in better, more competitive electricity prices.

Another recommendation was to interconnect the three main grids to enable producers to transport electricity to other parts of the country via the wholesale electricity spot market (WESM).

At present, only the Luzon and Visayas grids are interconnected through a submarine cable. The feasibility of connecting the Visayas and Mindano grids through the P24-billion Leyte-Mindanao interconnection project is still being evaluated by the National Grid Corp. of the Philippines.

In terms of the regulatory environment for power, investors pointed out the lack of an integrated energy policy and master plan that would supposedly identify the direction that the government was taking for various sources of energy such as renewable energy, natural gas, traditional fossil fuels and other alternative sources, including liquefied natural gas, which they said was a greener alternative option for power generation.

Investors again brought up the issue of restrictions on foreign equity for power projects. “Current policy prohibits most of the world’s renewable energy firms from investing in RE in the Philippines, except as minority partners, in which few are interested,” the paper stated.

Power has been indicated as one among the key infrastructure indicators critical in attracting foreign investments in the Philippines. Many industries have since lamented that the country’s electricity rates, deemed to be the highest in Asia, proved to be detrimental in boosting the competitiveness of Philippine businesses.